Losses can be categorized into three types. The first type is the most common, within the system's allowed stop-loss, which is considered a cost—taking a hit and standing tall. As long as the position size is controlled and you don't leave the trading table, it's acceptable. It's part of daily life, just like breathing and eating.

The second type is a black swan—an unpredictable, sudden market event that can pierce through stop-losses or even bypass them entirely, leading to margin calls. These are unpreventable and unpredictable; the only solution is to diversify positions. However, since they are low-probability events, occurring perhaps once a year, diversification minimizes damage.
The third and most complex type, which requires the most attention, involves losses caused by inadequate execution systems. Examples include psychological issues, misjudging market trends, misunderstanding market conditions, misjudging high and low points, incorrect assessment of momentum, over-leveraging, and so on. These problems are diverse and cannot be solved with a single sentence. They require long-term review, training, and continuous calibration to minimize their occurrence. The smaller these losses, the closer you are to success.
These three types of losses involve luck, systemic risk resistance, execution completeness, and more. Regardless of the cause, the core of risk management is simply two words: controllable.
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